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Property insurance bill goes to the full Senate

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Sen. Tom Wright

Sen. Tom Wright

Measure restricts fees for attorneys representing property owners

A bill limiting attorney’s fees when they represent homeowners when they press damage claims against insurance companies and which would allow in some cases lower payments for roof replacements is heading for the Senate floor.

SB 76 by Sen. Tom Wright, R-Port Orange, passed the Senate Rules Committee 12-5 on a largely party line vote on March 25.

Sen. Gary Farmer, D-Ft. Lauderdale, said while the bill purports to address the “problem” of a rise in litigation by property owners against insurance companies, that may not be the real issue.

“When an insurance company is underpaying or denying claims with such frequency that so many homeowners have to file suit, that too is a problem,” Farmer said. “When you say there’s this rise in litigation, why?”

Noting that current laws are intended to help individual homeowners when challenging giant insurance companies, he added, “This is a David versus Goliath situation and we’re taking away David’s sling.”

Sen. Jeff Brandes, R-St. Petersburg, though, argued changes are needed because insurance rates have been rapidly rising and could double in the next two or three years without some action.

He said the state-underwritten Citizens Insurance lost $100 million last year and “the industry as a whole lost $1.5 billion and this is the third or fourth year of consecutive losses. What we are seeing is a wholesale withdrawal from the Florida marketplace by major companies….

“It will take a year to 18 months, maybe 24 months, for the impact [of SB 76] and rates will go up 20% to 30% and, without this, will double within the next two or three years.”

The bill would set a schedule for attorney’s fees based on how a court award compared to the policyholder’s original demand. Property owners who receive 80% or more of their demand would recover all their attorney’s fees. Those who recover between 20% and 80% would get attorney’s fees equal to that percentage of recovery. If the recovery was less than 20% and the policyholder had assigned benefits to a third party, that third party would have to pay the insurance company’s legal fees.

Multipliers in lodestar cases, under the bill, would be awarded only in “rare and exceptional circumstances,” mirroring the federal court system and 49 other states.

The bill also would request the Supreme Court to adopt a Bar rule requiring plaintiff and defense attorneys in residential and commercial property claims to submit “closing statements itemizing the amount of the fee received by each defense and plaintiff lawyer or law firm, costs, and expenses to the Department of Financial Services.” Backers said that would allow better measuring of how fees and costs affect rates.

On coverage, the bill would allow insurance companies to pro rate replacement costs on roofs more than 10 years old, provided reimbursement would be at least 70% for metal roofs, 40% for a concrete or clay tile roof, 40% for a wood shake or shingle roof, and 25% for all other roof types.

Property owners would have to give insurance companies a 60-day notice before filing suit and owners would have to file the original, supplemental, or reopened claim within two years of when the damage initially occurred. The current law sets the time at three years.

Properties covered by surplus line insurers — policies usually tailored for special circumstances — also would be covered by the bill.

The provisions would become effective July 1.

The Rules Committee was the last stop before the bill goes to the full Senate.

There are two related, but less far-reaching bills moving in the Florida House. HB 717, which addresses consumer protection issues, has passed two subcommittees and is now in the Commerce Committee. HB 305, which addresses a variety of insurance issues but not attorney’s fees, has passed the Insurance and Banking Subcommittee and next goes to the Civil Justice and Property Rights Subcommittee and the Commerce Committee.

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